Jakarta, CNBC Indonesia – World gold prices are under pressure this week due to issues tapering who have not left the financial markets.
Reflecting on history, world gold prices could fall by more than 45% as a result of tapering. When world gold prices collapse, domestic prices for precious metals such as Antam’s gold also decline.
Tapering is a policy of reducing the value of the asset purchase program (quantitative easing/QE) bank sentral AS (The Fed).
When this is done, the flow of capital will leave the country emerging market and return to Uncle Sam’s country. This can trigger turmoil in financial markets called taper tantrum.
When that happened, the US dollar became mighty, and the world gold price, which was priced in Uncle Sam’s currency, took a hit.
Taper tantrum occurred in the period 2013-2015. But long before, gold had reacted to the Fed’s monetary policy.
Before pouring out QE due to the coronavirus disease (Covid-19) pandemic since March 2020, the Fed did the same thing during the 2008 global financial crisis.
The Fed at that time implemented QE in 3 stages. QE 1 began in November 2008, then QE 2 began in November 2010, and QE 3 in September 2012. The values were also different, when QE 1 the Fed bought backed securities worth US$ 600 billion, then QE 2 was also the same for US$ 600 billion but this time what was bought was US government bonds (Treasury).
QE 1 and 2 brought gold prices skyrocketed and touched an all-time high at that time of US$ 1,920.3/troy ounce on September 6, 2011. After that, gold prices sharply corrected to US$ 1,600/troy ounce and finally consolidated with the upper limit. in the range of US $ 1,800s/troy ounce, gold has never again approached its record.
QE 3 which was released by the Fed in September 2012 has not been able to bring the world gold price back to US$ 1,900/troy ounce, and it has even ended in “catastrophe” for the precious metal. QE 3 is different from the previous two monetary stimulus, this time its nature open-ended, meaning that the value is not limited as needed. At one point when the US economy has recovered then the QE will be discontinued, but previously it was done tapering. QE 3 at that time was worth US$ 85 billion per month.
Even though the QE value is large, the gold price doesn’t really respond because the market knows it will be done tapering that triggers taper tantrum.
Sure enough, the Fed, which was then led by Ben Bernanke, issued a discourse tapering in mid-2013 and began reducing QE by US$10 billion per month starting in December, until finally discontinuing in October 2014.
It didn’t stop there, after QE ended there was a discourse of normalization, aka the Fed’s interest rate increase. As a result, gold prices continued to decline to the lowest point reached at US$ 1,045.85/troy ounce on December 3, 2015.
This means that, when viewed from the record high in 2011 to the lowest level, the world gold price fell 45.54% within 4 years.
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